Austin Business Journal January 14, 2021, 3:32PM EST “The cost difference between California and Texas explained” “With all the gain comes some pain for Austin” by Kathryn Hardison
Read the article for full detail.
Summary of Article
Bottom line companies moving from urban California to the Austin metropolitan area can expect significant savings totaling as much as 20%. Those savings, especially wages will vary depending on exact relocation being less if in downtown Austin versus the suburbs like Round Rock.
For employees the big key is affordable housing and a shorter commute. Expanding on that, affordable housing comes in newer well-planned and smaller more manageable communities surrounding Austin. Combine those benefits with being close to an active city that features plenty of outside living and activities for families and adults without families. So, it’s more for your money and an easier family-friend lifestyle typically with lots of involvement in local school districts.
Although, not mentioned in the article, for employees staying on California wages means they get a raise after taxes and cost-of-living but if wages are adjusted downward those savings can diminish significantly. Austin’s rapid expansion may be limited by the ability to add more affordable housing and to deliver better roadways and transit options.
A look at the numbers. Driving lower cost-of-living for employees is 0% income tax versus as much as 13.3% in California, typical “Texas” home cost of $220,034 versus $609,757 in California. Comparing SF to Austin specifically a typical home is $1.38M versus $437,800 and rents are $3,111 versus $1,385. Narrowing the cost-of-living benefit are “Texas” median household income of $61,874 versus $75,235 for California. Looking at SF versus Austin that would be $68,883 versus $43,043. This gap can vary significantly by corporate role and clearly tech roles are getting more comparable especially at high-profile companies. Property tax of nearly 2.2% is higher than some California locales typically at 1.2% but similar to locales that have basic and the additional Mello-Roos property tax.
For businesses there’s no corporate income tax versus 8.25% in California but both states have franchise taxes with California also having an AMT of 6.65%. Looking at Class A office rents of $80/sq.ft in SF versus $45/sq.ft. in Austin. Of course, Texas is more business-friendly with fewer regulations. Currently, Austin has a relatively young, highly educated and tech-savvy employee pool with the November 2020 unemployment rate just 0.1% lower than California at 8.1%. At this time, there may still be some small incentives for companies bringing well-paid jobs to Austin and surrounding areas.
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